L3HARRIS INVESTOR OVERVIEW
Transcript of L3HARRIS INVESTOR OVERVIEW
L3HARRIS 1L3Harris Investor Overview
L3HARRIS
INVESTOR
OVERVIEWCALENDAR 2021 Q1 RESULTS
REPORTED APRIL 30, 2021
L3HARRIS 2L3Harris Investor Overview
Forward-Looking Statements
Statements in this presentation that are not historical facts are forward-looking statements that reflect management's current expectations, assumptions and estimates of future performance and economic conditions. Such statements are made in reliance on the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements in this presentation include but are not limited to statements regarding: the company’s plans, strategies, focus areas, priorities and objectives for future operations or results, including revenue growth, margin expansion, cash generation, and company, segment and other guidance for 2021; value creation and enhanced capital allocation opportunities, including cost synergies, margin expansion, share repurchases, dividends and portfolio shaping; accelerating capital returns, multiple levers for growth and value creation, threat and budget and revenue environments, demand for solutions, research and development spend, pipeline, guidance, trends and drivers supporting medium-term outlook; new products, services or developments; future economic conditions or performance; the outcome of contingencies; program, contract and order opportunities and awards and the value or potential value and timing thereof (including from revenue synergies); and other statements regarding outlook or that are not historical facts. The company cautions investors that any forward-looking statements are subject to risks and uncertainties that may cause actual results and future trends to differ materially from those matters expressed in or implied by such forward-looking statements. The company's consolidated results, future trends and forward-looking statements could be affected by many factors, risks and uncertainties, including but not limited to: actual impacts related to COVID; the loss of the company’s relationship with the U.S. Government or a change or reduction in U.S. Government funding; potential changes in U.S. Government or customer priorities and requirements (including potential deferrals of awards, terminations, reductions of expenditures, changes to respond to the priorities of Congress and the Administration, budgetary constraints, debt ceiling implications, sequestration, and cost-cutting initiatives); a security breach, through cyber attack or otherwise, or other significant disruptions of the company ’s IT networks and systems or those the company operates for customers; the level of returns on defined benefit plan assets and changes in interest rates; risks inherent with large long-term fixed-price contracts, particularly the ability to contain cost overruns; changes in estimates used in accounting for the company’s programs; financial and government and regulatory risks relating to international sales and operations; effects of any non-compliance with laws; the company’s ability to continue to develop new products that achieve market acceptance; the consequences of uncertain economic conditions and future geo-political events; strategic transactions, including mergers, acquisitions, divestitures and spin-offs and the risks and uncertainties related thereto, including the company’s ability to manage and integrate acquired businesses and realize expected benefits, the potential disruption to relationships with employees, suppliers and customers, including the U.S. Government, and to the company’s business generally and potential tax, indemnification and other liabilities and exposures; performance of the company’s subcontractors and suppliers; potential claims related to infringement of intellectual property rights or environmental remediation or other contingencies, litigation and legal matters and the ultimate outcome thereof; downturns in global demand for air travel and other economic factors impacting the company's commercial aviation products, systems and services business; risks inherent in developing new and complex technologies and/or that may not be covered adequately by insurance or indemnity; changes in the company’s effective tax rate; significant indebtedness and unfunded pension liability and potential downgrades in the company’s credit ratings; unforeseen environmenta l matters; natural disasters or other disruptions affecting the company’s operations; changes in future business or other market conditions that could cause business investments and/or recorded goodwill or other long-term assets to become impaired; the company’s ability to attract and retain key employees and maintain reasonable relationships with unionized employees; risks related to the ability to realize all anticipated benefits of the L3Harris merger or the timing thereof or related to difficulties in integrating the businesses; and delays in, or failures in respect of, anticipated satisfaction of divestiture closing conditions or the ability to obtain regulatory approvals and satisfy other closing conditions in a timely manner or at all, and other potential uses of proceeds from divestitures. The declaration of dividends and the amount and timing thereof and the level and timing of share repurchases will depend on a number of factors, including the company’s financial condition, capita l requirements, cash flow, results of operations, future business prospects and other factors. There can be no assurances that the company’s cash dividend rate wil l continue to increase or that the company will complete any or all share repurchases under the new authorization, which authorizes open market purchases, private transactions, transactions structured through investment banking institutions and any combinations thereof. The timing, volume and nature of share repurchases also are subject to business and market conditions, applicable securities laws, and other factors, and are at the discretion of the company and may be suspended or discontinued at any time without prior notice. Further information relating to these and other factors that may impact the company's results, future trends and forward-looking statements are disclosed in the company's filings with the SEC. The forward-looking statements contained in this presentation are made as of the date of this presentation, and the company disclaims any intention or obligation, other than imposed by law, to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Persons reading this presentation are cautioned not to place undue reliance on forward-looking statements.
L3HARRIS 3L3Harris Investor Overview
26%
74%
20%DoD
60%Other
20%
L3Harris Technologies overview
1CY20 adjusted EBIT, adjusted EBIT margin, and adjusted free cash flow (FCF) are non-GAAP financial measures (NGFMs); refer to NGFM reconciliations in quarterly earnings materials available on the L3Harris
investor relations website.
Engineers('000s)
Clearedpersonnel
('000s)
~19
~24
Strong customer
relationships
Margin1:
18.0%EBIT
1:
$3.3BRevenue:
$18.2B
Global reach…serving
over 100 countries
International
U.S.
Talent and culture of
innovationDiversified business
mix
65%
35%Prime
Sub
Cost
Plus
Fixed
Price
Creating a leading global defense technology company
L3Harris Technologies is an agile global
aerospace and defense technology
innovator, delivering end-to-end solutions
that meet customers’ mission-critical needs.
FCF1:
$2.7B
L3HARRIS 4L3Harris Investor Overview
Segment descriptions
ISR: Advanced integrated signals,
communications and electronic
intelligence and targeting mission
systems for strategic and tactical
aircraft platforms
Maritime: Power, electrical,
imaging, communication and
sensor systems for manned
platforms; integrated unmanned
vessels (surface & undersea)
Electro Optical: Advanced Electro-
Optic / Infrared (EO/IR), laser
imaging and targeting sensor
systems
Integrated Mission
Systems
Aviation
Systems
Space & Airborne
SystemsCommunication
Systems
5,538
15.3%
CY20 CY21 Guide
up 4.0 - 6.0%2
Revenue
($million)
non-GAAP
operating
margin
1
Space: Payloads, sensors and full-mission solutions for intelligence, surveillance & reconnaissance (ISR), missile defense, positioning, navigation & timing (PNT), and weather; ground-based space surveillance networks
Intel & Cyber: Situational awareness, optical networks and advanced wireless solutions
Mission Avionics: Sensors, processors, hardened electronics, release systems and antennas
Electronic Warfare: Threat warning and countermeasures capabilities for airborne, ground and maritime platforms
Tactical Communications: Tactical radios for U.S. and international defense customers
Global Communications Solutions: SATCOM terminals and battlefield management networks
Broadband Communications: Secure mobile networked equipment and integration
Integrated Vision Solutions: Full suite of helmet and weapon mounted integrated systems
Public Safety: Radios and equipment for public safety and professional communications
Defense Aviation: Precision weapon systems and components; small/tactical UAVs; antennas and arrays; RF & microwave devices
Commercial Aviation Products: Aircraft avionics products
Commercial & Military Training:Aviation simulation, training and pilot academy
Mission Networks: Communications and networking solutions for air traffic management
4,946
18.8%
CY20 CY21 Guide
4,443
24.4%
CY20 CY21 Guide
up 2.5 - 4.5%2
3,448
13.8%
CY20 CY21 Guide
Up 1.0 - 3.0%2
15.25 - 15.75% 18.25 - 18.75% 24.25 - 24.75% 13.75 - 14.25%
1Guidance provided April 30, 2021 – refer to 1Q 2021 quarterly earnings and related materials on the L3Harris investor relations website.2Organic revenue growth excludes revenue attributable to each divested business for the portion of the prior-year period equivalent to the portion of the current-year period following the date the business was
divested; refer to non-GAAP financial measure reconciliations in quarterly earnings materials or on the L3Harris investor relations website.
1 1 1
up 4.0 - 6.0%2
L3HARRIS 5L3Harris Investor Overview
74%
76%
84%
85%
86%
Financial profile
Leading margin with expansion
opportunity…
…and high cash conversion
versus peers
16.1%13.9%
12.4%10.9%
LHX guide
2021
adjusted
margin1 108%2021 FCF
conversion2
98%
89%
97%
74%
LHX
guide
LHX Peers
Healthy balance sheet… …with pension relatively well-funded
LHX2020
funded
ratio %3
1.6xLHX
2020
Net Debt/
EBITDA
0.9x
2.0x
1.7x
3.0x
1Peers based on 2021E consensus revenue and pre-tax profit, adding back net interest, LHX based on guidance 2Peers based on 2021E consensus FCF and net income, LHX based on guidance 3Reflects RTN pension funding
18.0 - 18.5%
L3HARRIS 6L3Harris Investor Overview
Strategic priorities
Grow revenue…well-aligned portfolio with investment in innovation
Deliver on integration commitments
Build on operational excellence and expand margins
Reshape portfolio…focus on high margin, high growth businesses
Maximize cash flow with shareholder-friendly capital deployment
L3HARRIS 7L3Harris Investor Overview
A growing need for L3Harris offerings…
Resilient Communications
Survivability
Resilient Space
Networked and Multi-
Function Systems2ISR capabilities
Autonomy
…and DoD budgets1 flattening…
…drive demand for advanced, resilient
and affordable solutions Threats rapidly evolving…
GFY 2000 2010 2022
715~690
~290
$billions
1Source: U.S. Office of Management and Budget (OMB) historical tables; represents 051 DoD Base, OCO and MilCon funding. GFY 2022 represents May 2021 President’s Budget Request (PBR). Outlook contingent
on future defense budget appropriations. 2Graphic source: U.S. DoD
L3HARRIS 8L3Harris Investor Overview
…As a Mission Solutions Prime with leading positions in all domains…
• Radio communications
• Battle management
systems
• Night vision systems
• SATCOM terminals
• Fuzing & ordnance
systems
• Multi-function processing
• Electronic warfare
• Unmanned aircraft
• Complex mission
solutions
• Specialized
communications
• Global intelligence
and cyber solutions
2020 Revenue
• Power and electrical
distribution systems
• Integrated bridge &
navigation
• Communication and
sensor systems
• Unmanned vessels
(surface & undersea)
• End-to-end responsive
satellite systems
• Exquisite payloads
• Hyperspectral sensors
• Space control &
situational awareness
• Space warfighting effects
• Signals intelligence (SIGINT)
• Electro-Optical / Infrared
turrets
• Datalinks and waveforms
Netw
ork
s a
nd
mu
lti-
do
ma
in o
pera
tio
ns
Air~$8.0B
Land~$4.0B
~$2.0BSpace
Sea
Cyber
~$1.5B
~$1.0B
Communi-
cation
Systems
Aviation
Systems
L3HARRIS 9L3Harris Investor Overview
Spectrum Superiority
Actionable Intelligence
Warfighter Effectiveness
…Differentiated by focused R&D spend
~4% of
Revenue
• Interoperability in contested environments
• Signal processing to counter advanced and evolving
threats…enhancing survivability
• Sensors to acquire, process, and target across
domains…enabling actionable intelligence
• Leverage artificial intelligence (AI) and machine learning
(ML) to fuse and deliver multi-modal sensor data
• Multi-function, open-systems architecture to enable cost
effective upgrades and sustainability
Avionics
Systems
Unmanned
Platforms
ISR
Electro
Optics
AI & ML
Electronic
Warfare
Resilient Comms
& Networking
Tactical
Communications
Building the infrastructure for the future fight
…creating unique technological
solutionsIndustry leading R&D investments…
L3HARRIS 10L3Harris Investor Overview
Well-positioned to navigate a shifting revenue environment…
Domestic positioning Revenue synergies International expansion
1Represents funded and unfunded backlog on an organic basis and is a non-GAAP financial measure (NGFM); refer to NGFM reconciliations in quarterly earnings materials available on the L3Harris investor relations
website.
Aircraft
MissionizationCommunication
Modernization
Fighter Upgrades &
Platform Expansion
Maritime
Platform Expansion
…supporting global modernization with
integrated solutions in 10 focus countries
MaritimeSpace
Electronic
Warfare
Avionics
3-year pipeline >$7B
~70% win rate on 50 proposals
awarded to-date
~$400M awarded to-date
Drives differentiated and sustainable growth over the medium term
Demand for L3Harris capabilities…Well-aligned solutions…
20.1 21.7
CY19 CY20
+8%
growth
Maritime
Tactical Radios
Night Vision
ISR Aircraft
Sats
Classified
Avionics& EW
Missile Defense
ClassifiedMaritime
…reinforced by strong backlog1 growth
Domestic
International
L3HARRIS 11L3Harris Investor Overview
…with progress to-date from prime-level wins and >$125B 3-year pipeline
Domestic
positioning
Long-term
potential
value
$2B+
Hypersonic and Ballistic
Tracking Space Sensor
(HBTSS)
Revenue
synergiesSpace Development
Agency (SDA)
Tracking Layer
~$4B
Next Generation
Jammer - Low Band
(NGJ-LB)
Unmanned Surface
Vessels
(USV)
$1B+
International
expansion
ISR Aircraft
Missionization
$3B+
Land Force
Modernization
$4B+
>$95B
pipeline
>$7B
pipeline
>$30B
pipeline
Getting image
F-16 Next-Generation
EW (Viper Shield™)
$2B+
Classified
ProgramsDefense Advanced
Research Projects
Agency
~$1.5B
Image: Lockheed Martin
$0.7B+ $0.2B+
L3HARRIS 12L3Harris Investor Overview
2019 savings 2020 savings 2021 savings
$65M net
$270M net
Deliver on remaining integration commitments
Corporate and
segment
consolidation
Functional
efficiencies, OH
reduction and
shared services
Supply chain
and footprint
rationalization
$320M - $350M net
Leverage combined $8B+ in purchasing power
Rationalize footprint of >400 locations, 28M square feet
Merged CHQ headquarters
Consolidated 6 to 4 operating Segments (and 28 to 19
sectors and 95 to 64 divisions)
Expanded shared services for IT and Finance
Leverage scale for lower employee benefits cost
Cumulative Cost Synergies
about 1 year ahead of plan
L3HARRIS 13L3Harris Investor Overview
• Increased cost synergies to $320M - $350M
net…drives margin expansion in 2021
• Accretive portfolio shaping
• Acceleration of operational excellence drives next
phase of cost opportunities
Steady to rising margins ahead
16.0%
16.8%
18.0%
MergerClose
CY19 CY20 CY21Guide
MediumTerm
18.0 - 18.5%
EBIT
margin1
18.5%+
…with additional opportunitiesUpward trajectory to-date…
Facility consolidation
Supplier optimization
Program excellence
Quality improvement
Factory productivity
Shared services
efficiencies
ERP reduction
1Adjusted EBIT margin is a non-GAAP financial measure (NGFM); refer to NGFM reconciliations at the end of this investor briefing and in quarterly earnings materials available on the L3Harris investor relations website.2Guidance provided April 30, 2021 – refer to 1Q 2021 quarterly earnings and related materials on the L3Harris investor relations website.
2
L3HARRIS 14L3Harris Investor Overview
To be announced
Announced
Divested
Portfolio shaping progressing well
$2.8 - $3.0
$0.3- $0.5
~$1.0
~10% of
Revenue
• ~10% of revenues anticipated to be divested
over time with ~80% completed or announced
• Efforts are ongoing…transactions will be
announced as they occur
• Expect to use 100% of proceeds for share
repurchases
• High-margin, high-growth, technology
differentiated businesses…
• …where we can win and generate attractive
returns
($billions)
~$1.5
Providing clarity on portfolio shaping
Criteria for retaining businesses
1
1Includes Security & Detection Systems, MacDonald Humfrey Automation, EOTech, Applied Kilovolts and Analytical Instrumentation businesses
L3HARRIS 15L3Harris Investor Overview
Cash generation to remain robust
1Adjusted free cash flow (FCF) = operating cash flow less net capital expenditures, excluding deal and integration costs; for CY19 first half, reflects separate company reported results; CY22 target excludes potential
tax policy impacts. Adjusted free cash flow is a non-GAAP financial measure (NGFM); refer to NGFM reconciliations in quarterly earnings materials available on the L3Harris investor relations website. 2Guidance provided April 30, 2021 – refer to 1Q 2021 quarterly earnings and related materials on the L3Harris investor relations website.3Excludes moderate pension contributions for international plans.
2.1
2.7
~3.0
CY19 CY20 CY21Guide
CY22Target
2.8 - 2.9
($billion)
• Continued EBIT growth
• Opportunity to reach ~40 days of working
capital from 55…focus on optimizing inventory
management and terms
• CapEx discipline…~2% of revenue
• Pension relatively well-funded at 84%... no
expected contributions3 over medium-term
Free cash
flow1 (FCF)
Maintain FCF conversion of 105%+
…with supportive outlookHealthy cash conversion…
0.4
Adjusted
FCF
L3 pre-
merger
adjusted
FCF
2
L3HARRIS 16L3Harris Investor Overview
Differentiated and accelerated capital returns
1CY19 average diluted shares is on a pro-forma basis. CY21 guidance provided April 30, 2021 - excludes use of net proceeds from recently announced and potential divestitures, and share count excludes effect of
additional share repurchases; refer to 1Q 2021 quarterly earnings and related materials on the L3Harris investor relations website.2Net Debt / EBITDA is a non-GAAP financial measure (NGFM); refer to NGFM reconciliations at the end of this investor briefing. Also, cash flow excludes moderate pension contributions for international plans.3Market capitalization as of 3/8/2021.
($billion, except share count in millions)
0.5
0.7
0.8
CY19 CY20 CY21Guide
MediumTerm
1.5
2.3 ~2.3
CY19 CY20 CY21Guide
MediumTerm
Dividends
Share Repurchases1
225
216
~206
Average
diluted
shares
• Announced 20% increase in January 2021…3rd
raise since merger for ~50% cumulative increase
• Target dividend growth to 30-35% payout of FCF
over medium-term
• Healthy dividend increases ahead
Share repurchases since merger and through 2022 expected to be ~25% of market capitalization3
• New $6B share repurchase authorization in
January 2021…
• …majority consumed through 2022 from cash
generation and incremental divestiture proceeds
of nearly $2B…
• …enabled by healthy leverage at 1.6x Net Debt /
EBITDA2 and no expected pension funding2
L3HARRIS 17L3Harris Investor Overview
FCF1 & capital allocation
Multiple levers for growth and value creation
• Continued EBIT growth
• Working capital and
capex discipline
• Capital returns…share
repurchases and
dividends
• Balance sheet optionality
• Increased cost synergy
savings in 2021
• Accretive portfolio
shaping
• Operational excellence
acceleration
• R&D spend driving
innovation
• Well-aligned with DoD
budget priorities
• Revenue synergies
• International expansion
Top-line growth Margin1 expansion
Differentiated and
sustainable growth
Best in class margins …
18.5%+
~$3B of FCF in 2022 …
more growth ahead
Execution on strategic priorities to drive double-digit bottom-line growth
1Adjusted EBIT margin and adjusted free cash flow (FCF) are non-GAAP financial measures (NGFMs); refer to NGFM reconciliations in quarterly earnings materials available on the L3Harris investor relations website.
L3HARRIS 18L3Harris Investor Overview
INTEGRATED
MISSION
SYSTEMS
L3HARRIS 19L3Harris Investor Overview
Integrated Mission Systems overview
Air
Sea
U.S. Air
ForceOther U.S. DoD
International
Government
Other U.S.
Government
U.S. Navy
U.S. Army
Commercial
Intelligence,
Surveillance,
Reconnaissance
(ISR)Maritime
Electro
Optical
• Core air and sea capabilities tightly aligned with National Defense Strategy…creates budget resiliency
• Geopolitical conflict and tighter budgets increase global demand for affordable ISR solutions
• Advances in missionized business jets and greater focus on multi-mission, multi-modal, configurable sensor systems
• Strong growth in U.S. and international shipbuilding, supplemented by shift to unmanned platforms
• Ability to leverage leading Electro-Optical position in air to expand into land and sea domains
5,360 5,538
13.0%
15.3%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
2,000
2,500
3,000
3,500
4,000
4,500
5,000
5,500
6,000
6,500
7,000
CY19 CY20 CY21 Guide
Revenue
($million)
non-GAAP
operating
marginup 4.0 - 6.0%
15.25 - 15.75%
2
1
For CY19 first half, reflects pro forma results included in L3Harris’ Current Report on Form 8-K filed May 4, 2020, and for non-GAAP operating margin, adjusted as indicated in non-GAAP financial measure reconciliations in quarterly earnings materials available on the L3Harris investor relations website. 1Guidance provided April 30, 2021 – refer to 1Q 2021 quarterly earnings and related materials on the L3Harris investor relations website.2Organic revenue growth excludes revenue attributable to each divested business for the portion of the prior-year period equivalent to the portion of the current-year period following the date the business was divested; refer to non-GAAP financial measure reconciliations in quarterly earnings materials available on the L3Harris investor relations website.
Segment financials Drivers supporting medium-term growth
Businesses CustomersDomains
L3HARRIS 20L3Harris Investor Overview
Discriminating signals intelligence, communications and modernization capability
EC-130H
Compass Call
C-130 Maintenance & Modernization
100s of
Aircraft
$125M/
yearC-130J
USCG, USMC
C-130H
Global Maintenance
C-130H
Avionics Modernization
Program
The world’s most prolific transport aircraft
RC-135
USAF Rivet Joint
Rivet Joint Signals Intelligence
~25 Aircraft
$800M-$1B/
yearSpecial Purpose Aircraft
The world’s most advanced ISR Aircraft
International (UK and KSA)
VC-25
Air Force One
National Command Authority Communications
~50 Aircraft
$300M-$400M/
yearC-40
Executive Transport
E-6B
Nuclear Command, Control & Communications
E-4B
The nation’s highest priority missions
60-year enterprise programs providing foundation for future growth
L3HARRIS 21L3Harris Investor Overview
Expanding airborne ISR…building off leading position
Premier Signals Intelligence and Electronic Warfare capability
• 60+ years premier airborne SIGINT mission system integration and
operations (Rivet Joint)
• 10+ years of medium altitude ISR operations (JAVA Man)
Scaled and integrated into select business jet / commercial aircraft …
• King Air 350
• Gulfstream G550
• Bombardier Global 6000
• Dassault Falcon 2000
…to meet growing US and International demand
Further adapted to ‘podded’ solution
for broader aviation industry
Current
Project Liberty
Compass Call
RC-135
USAF Rivet Joint
RIVET JOINT
Special Purpose Aircraft International
JAVA Man
1+ Million Flying Hours
Extended Range Medium Altitude Reconnaissance System
PEREGRINE
Canadian Medium Altitude ISR System
Compass Call Cross Deck
Enhanced Maritime
Awareness Capability
Armed Overwatch
Airborne Recon &
Electronic Warfare System
High Altitude Detection &
Exploitation System
Multi-Mission
System
NATO
INDIA
S. KOREA
FutureCalidus B250
Podded
Solutions
Inte
rnati
on
al ~
$600
M / y
ear
Mis
sio
niz
ed
co
mm
erc
ial
$800M
/ y
ear
Multi-Modal
Targeting Platforms
MENA
Eastern Europe
L3HARRIS 22L3Harris Investor Overview
Mission system provider and integrator U.S. Navy surface ship and submarine programs
Columbia Submarine
Total program value: ~$2.5B
12 ships + development + services
Power and Electrical
Distribution
Bow Sonar
Transducers
Mast–Mounted Imaging,
Communications, Radar
External
Radio and Acoustics
Communications
Auxiliary Systems
Constellation Class Frigate
Total program value: ~$1B
20 ships + development + services
Acoustic
Sensors
Hybrid
Electric
Drive
Power
Management
Communication
Systems
Mast Mounted
Sensors
Flight Deck
Equipment
Integrated Bridge &
Navigation
Electric and Propulsion
Systems Integration
Aviation
SystemsBridge and
Navigation
Systems
Steering
Controls
Design Services
Ship Systems
Integration
Towed Array
Sonars
L3HARRIS 23L3Harris Investor Overview
Maritime platformsFrom systems provider to systems integrator for U.S. and international navies
SSN-774Virginia
SSBN-826
ColumbiaFFG-62
Constellation
DDG-51ArleighBurke
Indigenous Defensive
Submarine
Canadian Surface
Combatant
SEA 5000 Frigate
Saudi Future Frigate
Taiwan Frigate
CVN-78Ford
LCSFreedom
LCSIndependence
LHA-8America
Key system provider / integrator
on Navy’s newest programs
On every new
construction
Naval platform
Leveraging strength of
U.S. programs for
international growth
Strong Maritime Book:Bill driven by:
• Higher content on new ship classes
• Evolving Systems Integrator role
• Growth in size of U.S. Navy
• International expansion
• Airborne ISR to Maritime
Airborne ISR networked across naval platforms
L3HARRIS 24L3Harris Investor Overview
Discriminating capability:
• 115 L3Harris USV’s operating around the world in
survey, maritime security, & mine counter
measures - no one else has as much experience
• Commanding lead in autonomy
• Strong competitive position
for next-gen
• Prime for undersea test
ranges & seabed
systems in
growing segment
Maritime capabilityUnmanned, seabed acoustics and naval networks
Iver 4 Unmanned
Undersea VehicleMaritime Mine Counter
Measures
Medium Unmanned
Surface VesselXLUUV
Undersea Tracking and
Training Ranges
Seabed Systems
Navy’s Seabed Acoustic
Systems provider
Navy’s next-gen
unmanned and
network links
Key provider of
unmanned capability to
U.S. and International
Navies
Next Gen Small UUV
Large Unmanned Surface Vessel
Resilient Naval Networks
Snakehead / Large Displacement UUV
Joint All Domain Command
and Control (Navy)
Razorback / Medium UUV
L3HARRIS 25L3Harris Investor Overview
Expanding Electro-Optical capabilitiesLand, Maritime, Unmanned domains
IM-SHORAD Air Defense
Special Operations Shadow Unmanned
World Class
Electro-Optical
Technology
Industry leading
airborne sensor provider
Future Tactical Unmanned
Aerial System
Future Attack Recon.
Aircraft
Tactical Reconnaissance
System (Switzerland)
Optionally Manned
Fighting Vehicle
Saudi High-Speed
Interceptor (HSI)
Vessels Upgrade
Shipboard Panoramic
Electro-Optical
Infrared
AC-130J Gunship
MX Product line
Driving growth through:
• Differentiating capabilities: Extensive service
footprint, proven reliability, superior
performance, large ITAR/Non-ITAR product
portfolio
• New platform captures
• Capitalizing on L3Harris synergies
• Strengthening relationships
• Displacing incumbents on
current platforms
• Expanding land,
maritime and
international
$2.3B
$1.5B
MQ-9B
Highly fragmented with
significant growth
opportunity
L3HARRIS 26L3Harris Investor Overview
SPACE &
AIRBORNE
SYSTEMS
L3HARRIS 27L3Harris Investor Overview
Space & Airborne Systems overview
For CY19 first half, reflects pro forma results included in L3Harris’ Current Report on Form 8-K filed May 4, 2020, and for non-GAAP operating margin, adjusted as indicated in non-GAAP financial measure reconciliations in quarterly earnings materials available on the L3Harris investor relations website. 1Guidance provided April 30, 2021 – refer to 1Q 2021 quarterly earnings and related materials on the L3Harris investor relations website.2Organic revenue growth excludes revenue attributable to each divested business for the portion of the prior-year period equivalent to the portion of the current-year period following the date the business was divested; refer to non-GAAP financial measure reconciliations in quarterly earnings materials available on the L3Harris investor relations website.
Segment financials Drivers supporting medium-term growth
Businesses CustomersDomains
Space
Cyber
Air
U.S. Air
Force
Other U.S. DoD
International
Government
Other U.S.
Government
& ClassifiedU.S. Navy
U.S. Army
Commercial
Intel & Cyber
Mission
Avionics
Space
Electronic
Warfare
4,689 4,946
18.6% 18.8%
2,000
2,500
3,000
3,500
4,000
4,500
5,000
5,500
6,000
CY19 CY20 CY21 Guide
Revenue
($million)
non-GAAP
operating
margin
up 4.0 - 6.0%
18.25 - 18.75%
2
1
• Space, air and cyber domains remain priorities to counter near-peer threats
• Space transitioning to warfighting domain…enhanced focused on leading payload and full-mission solution capabilities
• Wins on key prototype satellites…positioned to convert into multi-billion-dollar constellations
• Air shifting from permissive to contested environment…open-architecture and multi-function solutions for next-gen platforms
• Increased demand for cyber warfighting capabilities
L3HARRIS 28L3Harris Investor Overview
Space threats require a resilient and responsive architecture
L3HARRIS 29L3Harris Investor Overview
Customer acquisition strategies centered on selecting the mission capabilities, not the platform
INTELLIGENCE, SURVEILLANCE & RECONNAISSANCE
POSITION, NAVIGATION, & TIMING
Mission
Data Unit
L-Band Transmitter,
TT&C Transponder
Phased Array
Fed Reflector
Cross-Track
Infrared Sounder (CrIS)
NTS-3
SDA Tracking HBTSS
Optical Telescope
Assembly
WEATHER & MISSILE DEFENSE
• Over 60 years delivering high priority mission solutions
• Leading EO/IR and RF mission payload provider
• Leading provider of reflector and hybrid phase array antennas
• Space Domain Awareness provider to USSF
• Delivered USSF’s first operational space control system
• Over 40 years developing advanced GPS technologies
• Payloads and components on every U.S. GPS satellite
• Provide the heart of the system – the Mission Data Unit
• Recently awarded GPS IIIF SV 11-16 all digital payload
• Over 55 years delivering EO/IR solutions for weather
• 75+ weather and climate payloads…advancing with
recent study awards
• Advanced mission algorithms and open architecture
• Purposeful R&D to transition EO/IR capability to
missile tracking mission set
Classified
Advanced Baseline
Imager (ABI)
Innovative prototype
for more resilient PNT
Classified
Classified
5 prime awards
in last 6 months
WONWON
WON
WONWON
Next-Gen NOAA
WON
2023
L3HARRIS 30L3Harris Investor Overview
~$4B
Radio
Frequency Full Mission
Electro
OpticalFull Mission
Radio
Frequency
Full
Mission
Driving to full operational constellations and rapid factory production
50+
50+
10+
Full Mission
UpgradesNTS-3 20+
SDA Tracking
HBTSS
Full Mission100+
Phase 1 Prototype
Operational Constellation Number of Satellites
Potential Value
INTELLIGENCE, SURVEILLANCE & RECONNAISSANCE
POSITION, NAVIGATION, & TIMING
MISSILE DEFENSE
0
5
10
15
20
25
30
35
40
45
2021 2022 2023 2024 2025
SATELLITE DELIVERIES
PER YEAR
Factory business model with
constellations on 3-5 year
technology refresh cycle
1x
4x
~$1B
~$4B2022 2025+
L3HARRIS 31L3Harris Investor Overview
$1B+
Modernizing existing airborne platforms for the fight, while creating advanced capabilities for future platforms
DecoysUAV
SwarmsManned / Unmanned
Teaming
Small FormEW / Avionics
F-35 F-16F/A-18
Future Revenue
Potential Value
Open SystemProcessors
Advanced EO / IR Sensors
Smart Weapons Racks
Advanced
Antenna ArraysSmart Displays Communications
Software-
Defined EW
$5B+ $1B+ $0.5B+
B-52
NEXT-GENERATION PLATFORMSOpen architecture modular electronics
$10B+ INTEGRATED MULTI-DOMAIN NETWORKSSmall form electronics enabling networked distributed ops
$4B+
Modernization of key in service platformsMaintaining relevance for the future fight
L3HARRIS 32L3Harris Investor Overview
Cyber capabilities to counter hardened problem set
Complex mission solutions for classified customers
Specialized solutions fornational defense customers
Advanced RF solutions for specialized communications
Strategic Missions
International
Tactical Missions
82 8286 85 87
0
20
40
60
80
100
120
140
2018 2019 2020 2021 2022
CYBER BUSINESS
OUTPERFORMING THE MARKET
~$1B
DESIGN, BUILD, AND OPERATE SOLUTIONS FOR THE
MOST COMPLEX CYBER AND INTELLIGENCE NEEDS
• 2,500 employees, 5 countries
• 30 years mission experience
• Intelligence, defense, and law enforcement
Revenue
Classified
budget1
($billions)
CAGR
10%+
2%
1Represents U.S. intelligence budget including National Intelligence Program (NIP) and Military Intelligence Program (MIP).
L3HARRIS 33L3Harris Investor Overview
COMMUNICATION
SYSTEMS
L3HARRIS 34L3Harris Investor Overview
Communication Systems overview
For CY19 first half, reflects pro forma results included in L3Harris’ Current Report on Form 8-K filed May 4, 2020, and for non-GAAP operating margin, adjusted as indicated in non-GAAP financial measure reconciliations in quarterly earnings materials available on the L3Harris investor relations website. 1Guidance provided April 30, 2021 – refer to 1Q 2021 quarterly earnings and related materials on the L3Harris investor relations website.2Organic revenue growth excludes revenue attributable to each divested business for the portion of the prior-year period equivalent to the portion of the current-year period following the date the business was divested; refer to non-GAAP financial measure reconciliations in quarterly earnings materials available on the L3Harris investor relations website.
Segment financials Drivers supporting medium-term growth
Businesses CustomersDomains
Revenue
($million)
non-GAAP
operating
margin• Increased focus on warfighter effectiveness and resilient
communications
• Ramping multi-billion-dollar U.S. DoD and international radio and night vision modernization
• Demand for connected air and ground information networks… leverage incumbent position to drive spectrum superiority
• Managing budget / operational constraints in Public Safety caused by COVID-19…right sized cost for eventual recovery
Air
Other
LandBroadband
Communications
Integrated
Vision
Solutions Tactical
Communications
Public Safety
Global Communications Solutions
U.S.
Army
Other U.S. DoD
International
Government U.S. Air
Force
U.S. Navy
Commercial
4,278 4,443
22.4%
24.4%
2,000
2,500
3,000
3,500
4,000
4,500
5,000
5,500
CY19 CY20 CY21 Guide
up 2.5 - 4.5%
24.25 - 24.75%
2
1
L3HARRIS 35L3Harris Investor Overview
Global leadership
Source: 10K and company estimates.
0.10.2
0.3
0.4
0.7
1.01.1 1.1
1.2
1.0
0.7
0.50.4 0.4 0.4 0.4
0.6
0.8
1.0
0.2
0.2
0.2
0.3
0.3
0.4
0.50.5
0.5
0.7
0.7
0.80.9 0.9
0.80.8
0.9
0.9
0.9
0.3
0.4
0.5
0.7
1.0
1.3
1.61.6
1.7 1.7
1.4
1.31.3 1.3
1.2
1.3
1.4
1.7
1.9
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Domestic
International
Historical growth in
L3Harris tactical……led to L3Harris as #1 provider
in DoD and international
Harris
39%All others
($billion)
~$3.5BGround Tactical segment
L3Harris
40%+
All others
L3HARRIS 36L3Harris Investor Overview
#1 position driven by commercial model
Cost excellence
• Product cost reduction while increasing
capabilities
• Footprint consolidation into one world-class
manufacturing facility
• Global supply chain
Continuous innovation
• Investment of internal R&D…supports
opportunities to expand into adjacencies
• Leverage common platform
• Broadest, combat proven product portfolio
• Unmatched portfolio of waveforms
Global customer intimacy
• Anticipating and driving requirements
• Extensive distribution network
• Large installed base1 2
3
1
2
3
Commercial business model… … enabled competitive edge
L3HARRIS 37L3Harris Investor Overview
583 673
939
1,042
1,290
1,705 1,765
1,919
1,561
'17 '18 '19 '20 '21 '22 '23 '24 '25
Executing on well-funded DoD modernization priority…
*SOCOM GFY23-25 equal to GFY22 President’s Budget Request1IDIQ’s represent the maximum potential spend over the duration of the contractual period of performance, and budget cap may not be met.
Army HMS Manpack2-channel multiband manpack
$12.7B
IDIQ
Multi-vendor
Army Rifleman Radio1-channel, 2-channel Leader radio
$3.9B
IDIQ
Multi-vendor
Navy and USMC tactical radiosHF and next-gen 2-channel radios
$765M
IDIQ
Single-award
SOCOM Tactical Comms2-channel multiband manpack
$255M
IDIQ
Single-award
SOCOM Tactical Comms (STC)2-channel multiband handheld
$390M
IDIQ
Single-award
($million)
Army and USMC
modernization
driving growthArmy
Air Force
Marines/Navy
SOCOM*
GFY21 President’s
Budget Request
GFY
COTS
LHX CY DoD Revenue
USMC tactical radiosLong Range HF Manpack
Single-award
$383M
IDIQ
DoD Tactical Radio modernization spend set to
be $8B+ over the next 5 years……with LHX awarded positions on all major
U.S. tactical radio contracts1
L3HARRIS 38L3Harris Investor Overview
…and maintaining international leadership
*31% share as of 2019 internal analysis
LHX’s large and growing installed base in over 100 countries
will continue to add stable and repeatable revenue
LHX Share*
(Thousands of tactical radios)
2008 2020
Falcon 1
Falcon 3
Falcon 2
380
SINCGARS
21% 31%
135
• Drive global refresh &
modernization leveraging
incumbency and local
partnerships
• Capture Allies / NATO
modernization programs with
Falcon IV next generation
products
• Penetrate new geographies and
customers with unique needs to
address evolving regional
threats
L3Harris’ growing share of the
international installed base…
…with multi-billion-dollar
modernization pipelineGrowth strategy
L3HARRIS 39L3Harris Investor Overview
International expansion supports Global Communication Systems growth
Positioning L3Harris as an end-to-end
solutions provider…
…and leveraging franchise programs to
drive global growth
Vehicle Systems
and Networks
Beyond Line of
Sight SATCOM
Mission platform
design & integration
Shared voice, data and
video; Battle Management
& Situational Awareness
SATCOM solutions to
extend network capabilities
Integration of multi-band,
multi-modem terminals
• Capture key U.S. DoD modernization efforts with
next-gen SATCOM systems, while expanding
internationally
• Grow franchise network programs and capture
adjacencies in the UAE and Australia
• Leverage existing channels to penetrate new
geographies and customers to address evolving
regional threats
Army Marines SOCOM
250 300
CY19 CY20 CY21guide
Mediumterm
($ millions)
Revenue
Up
mid-teens
~~
L3HARRIS 40L3Harris Investor Overview
Strong incumbency position and technology in Broadband Communications…
Assured Communications
Spectrum Convergence
Mission Networks Advanced software defined networking
ensure connectivity autonomously using all
available resources across all domains
(space, air, land, sea, cyber)
Waveforms and advanced networking
adaptive low probability of detect,
intercept and anti-jam waveforms
Next Generation Jammer
Low-Band
Advanced tactical datalinks, networked-
collaborative weapons, free-space optics (FSO)
Apache
Grey Eagle/PredatorWeapons datalinks
Contested comms
Strategic/tactical FSO
Senior leader communications
Advanced battle management
and investment in innovation…Convergence of communications,
electronic warfare, cyber and ISR
Global Hawk U-2Rover 6
Primary platforms driving ~$1B in annual revenue
Next generation modems
High rate data transfer, software
upgradable, autonomous capability
Multi-domain capabilities
Multi-path resilient system solutions
providing multi-role capacity &
interoperability
Leverage strong incumbent position in
networked communications and integration……to drive spectrum superiority
L3HARRIS 41L3Harris Investor Overview
1.11.2
2019 2020 medium term
…and integrated & networked vision market
Products
Market
Calendar Year
• Leading edge Night Vision technology
• Full suite of EO/IR day/night fighting equipment for the
dismounted warfighter
• Bundled portfolio solutions for U.S. DoD, federal law
enforcement and trusted allies
• Integrated warfighter solutions including wirelessly
connected sensors, lasers and near-eye displays
• Large installed base and global reach
• Strong lifecycle support
($billion)
Systems
Market
Land 53 Tranche 2
Land 159
>$170M
ENVG-B
(Sole source award
for Phase I)
19T CH 02487 56161107.83m
Hostile – Active (hostile)19T CH 00714 55758
252.3° 1818.4m
~$2B
Next Generation
Fire Control
~$1.3B
Strong market at the beginning of a
modernization cycle L3Harris has grown into an industry leader…
…and expanding market share by capturing
solid positions on strategic programs
L3HARRIS 42L3Harris Investor Overview
AVIATION
SYSTEMS
L3HARRIS 43L3Harris Investor Overview
Aviation Systems overview
• Near-peer threats driving demand for next-gen weapon systems
• Increased demand for tactical UAS to operate in contested environments
• Evolving FAA regulations and mandates for next-gen airspace…positioned to expand internationally
• Managing downturn in Commercial Aerospace caused by COVID-19…right sized cost for eventual recovery
Revenue
($million)
non-GAAP
operating
margin
For CY19 first half, reflects pro forma results included in L3Harris’ Current Report on Form 8-K filed May 4, 2020, and for non-GAAP operating margin, adjusted as indicated in non-GAAP financial measure reconciliations in quarterly earnings materials available on the L3Harris investor relations website. 1Guidance provided April 30, 2021 – refer to 1Q 2021 quarterly earnings and related materials on the L3Harris investor relations website.2Organic revenue growth excludes revenue attributable to each divested business for the portion of the prior-year period equivalent to the portion of the current-year period following the date the business was divested; refer to non-GAAP financial measure reconciliations in quarterly earnings materials available on the L3Harris investor relations website.
Segment financials Drivers supporting medium-term growth
Businesses CustomersDomains
Commercial
Aviation Products
Commercial
& Military
Training
Mission
Networks
Defense
Aviation
Sea
Other
Air
Land
U.S. Air
Force
Other U.S. DoD
International
Government
Other U.S.
Government
U.S. Navy
U.S. Army
Commercial
3,917
3,448
12.8%13.8%
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
CY19 CY20 CY21 Guide
up 1.0 - 3.0%
13.75 - 14.25%
2
1
L3HARRIS 44L3Harris Investor Overview
Defense Aviation enhances the battlefield
Multi-Function Apertures
Tactical UAS
• LHX patented Hybrid Quadcopter
technology
• Awarded Army and SOCOM IDIQs
for Future Tactical UAS
• Converges Radar, EW, SIGINT &
Communications
• Enterprise-wide applications
• Leader in defining the open system
standards and enabling critical
technology
Increasingly contested environments driving need for precision engagement technologies
Weapons
Sensors
Radar
SystemsGPS & Navigation Systems
Range and Test
Solutions
Supporting the battlefield today… …and driving future capability
L3HARRIS 45L3Harris Investor Overview
Leveraging 25-year trusted FAA partnership to grow air traffic management franchise
Early FAA successes led to FTI cornerstone win – July 2002
20-year, $5B
Nationwide air traffic telecommunications network providing critical voice, data, video
L3Harris owned and operated
Excellent performance
99.999% network availability
Connects 4,400+ FAA, DoD facilities
27,000+ services supporting 50,000+ users
Enables digital text-based messages in the
cockpit
Completed deployment at 62 tower sites;
enroute deployment started in 2019, currently
operational at 3 centers
Key enroute deployment statistics:
Completed 2.6M+ transactions
Saved 180K+ minutes of radio time
Prevented 47K+ readback errors
Serviced 22 aircraft types with 17 operators
ADS-B
L3Harris owned and operated network
Largest air traffic control surveillance network in world; broadcasts aircraft position to ground
650+ radio stations across US; covering 4 million sq mi of U.S. airspace with 1,100 surveillance sensors
FAA equipage mandate requiring ADS-B in all controlled airspace effective January 2020
DATA COMM
1. FTI program recompete, FENS (FAA Enterprise Network Services)
3. International expansion
2. FAA surveillance upgrades and modernization
Wide-Area Multilateration (WAM) deployments
provide additional spectrum efficient capability
where radar is limited
Space-Based ADS-B deployment with initial
support for oceanic routes
Bandwidth
Up 5x
FAA Telecom Spend
Down 50%
Comms-Related
Air Traffic Delays
Down 99%
(select programs)
2003 2020
A Model Public-Private Partnership
Strong performance on FAA
Telecommunications
Infrastructure (FTI)…
…and FAA NextGen
programs……positions us well for…
L3HARRIS 46L3Harris Investor Overview
Stabilizing Commercial Aerospace exposure
Recorders
Transponders
Traffic Collision
Avoidance
(TCAS)
Standby Systems
Training Solutions
Simulation, Airline Training,
Cadet Academy
• Optimized cost structure…facility
consolidation and overhead reduction
• Stability expected in Q2 with top-line
growth improving in second half 2021
• Growth over the medium-term expected
to align with market recovery…
• …with margin expansion following the
top-line improvement
Products ~60% of revenue Training ~40% of revenue
Revenue reduced by ~50% to ~$400M on a LTM basis
Significant downturn for air traffic in 2020,
with stability expected in 2021…
…LHX managed headwind via right-sized cost
structure to position for potential recovery
1. Source: IATA and Jefferies Revenue Passenger Kilometers (RPK) March 2021 estimates
-
2
4
6
8
10
12
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Global Air Traffic - RPKs1 Pre-COVID
baseline
forecast
Latest
baseline
forecast
tril
lio
ns
pe
r year
L3HARRIS 47L3Harris Investor Overview
ESG AND
INTEGRATION
L3HARRIS 48L3Harris Investor Overview
L3Harris committed to ESG
Environmental Social Governance
2026 Goals1 Board of Directors elected annually by
shareholders
10 of total 12 directors are independent
Diverse mix of backgrounds, skills and
experience
Dedicated to fostering a diverse and inclusive
work environment…
Greenhouse Gases (GHG)
Water Use
Waste Diversion
from Landfill
1Over a baseline year of 2019
75% rate
20%
30%24% 24%
50%
33%
Female Persons of Color
2020
Long-term
goal
…and committed to our global communities
through STEM education, mission-aligned
programs and community development
~530 community projects completed in 2020
of employees trained on anti-corruption
policies and procedures
100%
100%score on the Human Rights Campaign
Corporate Equality Index 2020
ESGsteering committee formed…elevating
our focus on sustainability
Unwavering commitment to the highest ethical
standards…underpinned by core values:
~
~
Entered into a long-term power purchase
agreement for renewable energy
Up to 100 megawatts of capacity
Lowers GHG emissions
L3HARRIS 49L3Harris Investor Overview
Potential revenue synergies
Software defined EW
Electronic
Warfare
Advanced EW
solutions supporting
multiple platforms
Leverage L3 manned & unmanned platforms to
pull-through HRS EW, comms and cyber
capabilities
Offering unique solution to address unmet
customer need
Allows capture of more complex systems
integration roles
Expand addressable market
Satellite pathfinders Datalinks and sensors
Space
End-to-end
solutions
Combined expertise in optical and RF payloads,
SATCOM and mission knowledge
Expands portfolio of mission offerings and fills
critical capability gaps
Increase customer stickiness
Open systems processor Multi-function phased array
Enhanced resource usage, lower SWaP and
interoperability
Strengthens offering for existing refresh
opportunities and next-gen platforms
Penetrate new markets
Avionics
Multi-function
open architecture
Down-selected on 34 of 50 awards and building on a multi-billion-dollar pipeline
Maritime
Enabling distributed
maritime operationsVessel integration, SIGINTComms, EW, Cyber
Manned and unmanned
platform missionization
L3HARRIS 50L3Harris Investor Overview
10 businesses drive ~70% of
sector working capital
Significant working capital improvement opportunities exist
1Excludes impact of divestitures and accounting-related adjustments
Roadmap of opportunities... ...to drive best in class working capital
Path to 40 - 50 days in
2022 and beyond
68
75
55
41
LHX -MergerClose
LHX -Q1 End
LHXOpportunity
LegacyHRS
Best InClass
1
40 - 50
250
500
750
1,000
1,250
1,500
1,750
2,000
25 50 75 100 125 150
Working Capital Days as of CY21 Q1
Revenue
($million)Represents working
capital dollars
55
Inventory (55 - 65 days)– Reduce cycle times
– Enhance forecasting accuracy
– Implement vendor managed inventory
– Improve supplier delivery
performance
– Increase advanced payment position
– Reduce billing cycle time
Receivables (20 - 30 days)– Disciplined negotiation of contract
terms
Payables (35 - 45 days)– Standardize and extend vendor
payment terms
– Implement shared service business
model
35 - 40
L3HARRIS 51L3Harris Investor Overview
FIRST QUARTER
CALENDAR 2021
RESULTS
L3HARRIS 52L3Harris Investor Overview
Strong 1Q21 financials
1Organic revenue growth excludes revenue attributable to each business divested in fiscal 2020; refer to non-GAAP financial measure (NGFM) reconciliations in quarterly earnings materials or on the L3Harris investor
relations website.2Non-GAAP EPS, adjusted EBIT, adjusted EBIT margin and adjusted free cash flow (FCF) are NGFMs; refer to NGFM reconciliations in quarterly earnings materials or on the L3Harris investor relations website.
($million, except per share amounts)
L3HARRIS 53L3Harris Investor Overview
Updated 2021 full-year guidance
1Organic revenue growth excludes revenue attributable to each business divested in fiscal 2020; refer to non-GAAP financial measure (NGFM) reconciliations in quarterly earnings materials or on the L3Harris investor
relations website.2Non-GAAP EPS, adjusted EBIT, adjusted EBIT margin and adjusted free cash flow (FCF) are NGFMs; refer to NGFM reconciliations in quarterly earnings materials or on the L3Harris investor relations website.
L3HARRIS 54L3Harris Investor Overview
COVID
The ongoing attempts to contain and reduce the spread of COVID, such as mandatory closures, “shelter-in-place” orders and travel and quarantine restrictions, have caused
significant disruptions and adverse effects on the U.S. and global economies, such as impacts to supply chains, customer demand, international trade and capital markets.
L3Harris' response has involved increasing its focus on keeping its employees safe while striving to maintain continuity of operations, meet customer commitments and support
suppliers. For example, the company instituted work-from-home (for employees who are able to work remotely) and social distancing arrangements; canceled travel and
external events; procured personal protective equipment for employees; implemented health screening procedures at all facilit ies; staggered work shifts, redesigned work
stations, implemented stringent cleaning protocols and initiated more detailed safety precautions and protocols for on-site work, such as daily health assessments and
mandatory face coverings, which currently remain in effect. The company has also maintained an active dialog with key suppliers and developed plans to mitigate supply chain
risks. The company has allowed certain essential business travel to resume, and continues to expect to utilize a phased approach based on local conditions for transitioning
employees from work-from-home arrangements to on-site work or hybrid arrangements. As COVID vaccines are being distributed and administered throughout the U.S. and
global community, the company is currently facilitating the provision of vaccines to its workforce. The U.S. Government response to COVID has included identifying the Defense
Industrial Base as a Critical Infrastructure Sector and enhancing cash flow and liquidity for the Defense Industrial Base, such as by increasing progress payments and
accelerating contract awards. As a part of the Defense Industrial Base, these actions have enabled the company to keep its U.S. production facilities largely operational in
support of national security commitments to U.S. Government customers and to accelerate payments to small business suppliers, which it expects to continue while the U.S.
Government’s responsive actions remain in effect.
Although the company believes that the large percentage of its revenue, earnings and cash flow that is derived from sales to the U.S. Government, whether directly or through
prime contractors, will be relatively predictable, in part due to the responsive actions taken by the U.S. Government described above, the company's commercial, international
and public safety businesses are at a higher risk of adverse COVID-related impacts. For example, the severe decline in global air traffic from travel restrictions and the resulting
downturn in the commercial aviation market and its impact on customer operations has significantly reduced demand for flight training, flight simulators and commercial avionics
products in the company's Aviation Systems segment. As a result, the company temporarily closed some of its flight training facilities, initiated restructuring and other actions to
align its resources with the outlook for the commercial aviation market (including workforce reduction and facility consolidation) and recognized $767 million of charges for
impairment of goodwill and other assets and other COVID-related impacts in fiscal 2020.
The company’s 2021 guidance reflects the company’s current expectations and assumptions regarding disruptions, containment ac tions and other COVID-related impacts,
including on the U.S. and global economies. These assumptions continue to include a measured assessment of the downturn in the commercial aerospace business and in
demand for public safety solutions, as well as additional potential risks from facility shutdowns, supply chain disruptions and international activity weakness. The company’s
current expectations and assumptions could change, which could negatively affect the company’s outlook. The extent of these disruptions and impacts, including on the
company's ability to perform under U.S. Government contracts and other contracts within agreed timeframes and ultimately on its results of operations and cash flows, will
depend on future developments, including the severity and duration of COVID-related impacts and associated containment and mitigation actions taken by the U.S. Government,
state and local government officials and international governments, and consequences thereof, and global air traffic demand and governmental subsidies to airlines, all of which
are uncertain and unpredictable, could exacerbate other risks described in the company’s filings with the SEC and could mater ially adversely impact the company’s financial
condition, results of operations and cash flows.
L3HARRIS 55L3Harris Investor Overview
Regulation G Disclosures
To supplement our condensed consolidated financial statements presented in accordance
with U.S. generally accepted accounting principles (GAAP), we provide additional financial
measures that exclude or include amounts, or are subject to adjustments, so as to be
different from the most directly comparable financial measures calculated and presented in
accordance with GAAP. L3Harris management believes that these non-GAAP financial
measures, when considered together with the GAAP financial measures, provide information
that is useful to investors in understanding period-over-period operating results separate and
apart from items that may, or could, have a disproportionately positive or negative impact on
results in any particular period. L3Harris management also believes that these non-GAAP
financial measures enhance the ability of investors to analyze L3Harris’ business trends and
to understand L3Harris’ performance. In addition, L3Harris may utilize non-GAAP financial
measures as guides in its forecasting, budgeting, and long-term planning processes and to
measure operating performance for some management compensation purposes. Any
analysis of non-GAAP financial measures should be used only in conjunction with results
presented in accordance with GAAP. A reconciliation of these non-GAAP financial measures
with the most directly comparable financial measures calculated in accordance with GAAP
follows:
L3HARRIS 56L3Harris Investor Overview
Reconciliation of Non-GAAP Financial Measures –Organic Total Backlog growth since the L3Harris Merger
Total Backlog Growth
(Dollars in millions) January 1, 2021 January 3, 2020 June 29, 2019
Backlog $ 21,670 $ 20,551 $ 19,893
Adjustment for divestitures(1) — (405) (394)
Organic Backlog $ 21,670 $ 20,146 $ 19,499
YOY % increase 5%
Organic YOY % increase 8%
% increase since the L3Harris Merger 9%
Organic % increase since the L3Harris Merger 11%
(1)Adjustments to exclude backlog attributable to following divested businesses: the Security & Detection Systems and MacDonald Humfrey Automation solutions business, divested on May 4, 2020; the Applied Kilovolts and Analytical Instrumentation business, divested on May 15, 2020; and the EOTech business, divested on July 31, 2020.
L3HARRIS 57L3Harris Investor Overview
Reconciliation of Non-GAAP Financial Measures –Adjusted EBIT Margin growth since the L3Harris Merger
Adjusted EBIT Margin GrowthFiscal Year Ended
(Dollars in millions) January 1, 2021 June 29, 2019(1)
Revenue from product sales and services (A) $ 18,194 $ 17,240
Net income (B) $ 1,086 $ 1,527
Adjustments:
Discontinued operations, net of income taxes 2 5
Net interest expense 254 272
Income taxes 234 182
Pre-merger integration costs, including change in control charges — 93
L3Harris Merger integration costs 130 —
Restructuring charges and other items 29 —
Amortization of acquisition-related intangibles 709 642
Additional cost of sales related to the fair value step-up in inventory sold 31 —
Business divestiture-related (gains) losses 51 6
Other divestiture-related expenses 13 —
Impairment of goodwill and other assets related to divestitures and COVID impacts 767 —
Gain on sale of property, plant and equipment (22) —
Non-cash cumulative adjustment to lease expense (2) —
(Gains) losses and other costs related to debt refinancing (2) 24
Total adjustments 2,194 1,224
Adjusted EBIT (C) $ 3,280 $ 2,751
Net income margin percentage (B) / (A) 6.0% 8.9%
Adjusted EBIT margin percentage (C) / (A) 18.0% 16.0%
Net income margin decrease since the L3Harris Merger (290) bps
Adjusted EBIT margin increase since the L3Harris Merger 200 bps
(1) Fiscal year ended June 28, 2019 results are presented on a pro forma basis. "Pro forma" refers to the applicable result for f iscal year 2019 prepared in a manner consistent with Article 11 of Regulation S-X.
L3HARRIS 58L3Harris Investor Overview
Reconciliation of Non-GAAP Financial Measures –Net Debt to Adjusted EBITDA Ratio
Net Debt to Adjusted EBITDA Ratio
(Dollars in millions) January 1, 2021
Short-term debt $ 2
Current portion of long-term debt, net 8
Long-term debt, net 6,908
Total debt 6,918
Less cash and cash equivalents 1,276
Net debt $ 5,642
Income from continuing operations before income taxes $ 1,322
Net interest expense 254
Depreciation and amortization 1,032
EBITDA $ 2,608
Net Debt to EBITDA ratio 2.2
Adjustments:
L3Harris Merger integration costs 130
Restructuring charges and other items 29
Additional cost of sales related to the fair value step-up in inventory sold 31
Business divestiture-related losses 51
Other divestiture-related expenses 13
Impairment of goodwill and other assets related to divestitures and COVID impacts 767
Gain on sale of property, plant and equipment (22)
Non-cash cumulative adjustment to lease expense (2)
Gain related to debt refinancing (2)
Total adjustments 995
Adjusted EBITDA $ 3,603
Net Debt to Adjusted EBITDA ratio 1.6